COMPLIANCE
Health and social care levy The panel opened with discussion of the health and social care levy. The group were confident that payroll professionals were prepared for the changes in the 2022/23 tax year but were anxious for the detail of the 2023/24 changes to be shared sooner rather than later. Although it’s anticipated the rules will broadly follow the National Insurance (NI) principles, as per the 2022/23 calculation, businesses and software providers need to prepare as soon as possible. The 2022/23 tax year sees the introduction of two new employer reliefs in National Insurance The payslip message recommended by Her Majesty’s Revenue and Customs (HMRC) has received criticism across various platforms, and the panel agreed the message created challenges. The message was particularly problematic for the devolved nations, who receive funding to health and social care using a different formula. Software providers were also in a difficult position, with some clients expecting the message to be the default, and others not wanting to use the message at all. The panel also raised concerns about the impact on those in the contractor sector, who would see a drop in income as employment costs would be included in their contracts. Agency workers will need to be issued with a new key information document from April 2023. This is because the introduction of the health and social care levy as a separate deduction would form a material change under the rules.
of two new employer reliefs in NI. The panel’s main concern was linked to the implementation of the freeport upper secondary threshold (FUST). The threshold is set at £25,000 per year and allows freeport employers to claim NI relief up to this amount for eligible employees. However, HMRC has issued documentation to software providers which requires the FUST to form part of all NI calculations where earnings reach the relevant threshold, regardless of which NI category is applied. Please see the example below to illustrate this point. This introduces a new way to calculate NI, and in some circumstances, if it’s calculated without considering the FUST, the result could differ. The impact here is predominantly on software providers who will need to reconfigure systems to use the new calculation. The CIPP is currently working with HMRC to understand the impact this change should have on training approaches. The panel also discussed the veteran’s NI relief and were disappointed that this is seemingly being underutilised. The application of this new relief created a potential blueprint for other NI incentives to be introduced. Unfortunately, the lack of uptake will more than likely result in the sunset clause taking effect, and this change being confined to the history books. Holiday pay The panel went on to talk about holiday pay, as there have been several cases in the courts recently. The case of Harpur Trust v Brazel, heard in the court of appeal (COA), held that the 12.07% calculation for holiday pay is not compatible with the Working Time Regulations. This calculation is widespread across umbrella companies and could have a significant impact both there, and in a variety of other areas, if the Supreme Court agrees with the decision in the COA. Their decision is, at the time of writing, pending. Everyone agreed the holiday pay calculation can be incredibly challenging, and even software can find it difficult to
produce a 100% automated solution for compliant results. For example, holiday pay should be calculated based on the 52-weeks’ pay preceding the holiday, but many employees are paid monthly, creating a challenge for software to understand pay as a weekly value for holiday purposes. Everyone agreed that the holiday pay calculation can be incredibly challenging The administrative challenges can make holiday pay calculations difficult, and tricky to understand for employees. The panel suggested that a change to legislation, aligning holiday pay to modern employment may be the best option for bringing improvements in this area. Automatic enrolment (AE) Finally, the panel looked at the proposed changes to AE – reducing the enrolment age to 22, and removing the lower qualifying threshold. A private member’s Bill looking to implement these changes is currently on hold until the next Parliamentary year. The panel agreed it could be difficult to encourage individuals to place pensions high up on their agenda. Many had experience of younger employees or those on low pay opting out of pension contributions because they needed access to their money now. The panel were keen to see better tools to demonstrate the benefits of pension savings, to help persuade more earners to remain in the scheme and save for the future. The next technical panel is scheduled to take place in September 2022, and will be hosted by the CIPP's new policy lead, Samantha O'Sullivan. n
How can members get involved in the technical panel?
NI relief The 2022/23 tax year sees the introduction
The CIPP's policy team is keen to hear questions and topics that members would like to see debated and discussed by the technical panel. If you have anything you would like to ask, please get in touch and email the policy team at policy@cipp.org.uk to get your items on the agenda.
Freeport example (employee on NI category A): Monthly earnings = £3,000 Earnings up to LEL = £533 x nil = £0 Earnings from LEL to ST = £225 x 0% = £0 Earnings from ST to FUST = £1,325 x 15.05% = £199.41 Earnings from FUST to UEL = £917 x 15.05% = £138.01 Total employer NI due = £199.41 + £138.01 = £337.42
17
| Professional in Payroll, Pensions and Reward |
Issue 80 | May 2022
Made with FlippingBook - Online magazine maker